O'Malley puts tax increases on the table for 2012 legislature

OCEAN CITY — — Gov. Martin O'Malley signaled that tax increases could be in the cards during next year's legislative session, though he said any state action would depend on congressional budget-cutting decisions this winter.

In a speech to local government leaders Saturday, the Democratic governor trumpeted Maryland as a leader in job creation among the states and highlighted leaner government spending in the last five years. But he said the state's economic well-being remains threatened by uncertainty about the federal budget.

"Any further help from Washington is doubtful, and more serious hurt to all state economics from the narrow-minded faction of jobs-obstructionists in Congress is very likely," O'Malley said. "We must be willing to adapt. … We will have to make more cuts, and at the same time — to protect our children's future — we must be open to new revenues."

Speaking to reporters after delivering the keynote address at the Maryland Association of Counties summer conference, O'Malley declined to go into detail. He said conversations about new revenues should wait until after the congressional "super committee" makes its recommendations in December for cutting the federal budget deficit. He said because of that timetable, it's unlikely that taxes would come up in the General Assembly's special legislative session this October.

"I think we have to be ready for what damage might be to the state economy by a very unpredictable balance in Congress," said O'Malley, a Democrat. He would not describe what could be on the table for tax increases, saying, "I'm not talking about those today."

O'Malley stressed job creation as a way to weather economic uncertainty with the state budget's looming $1 billion deficit, and said coming budget discussions will be affected by several shortfalls: general revenues, "flush tax" money that pays for waste water improvements, and transportation funding. He called for a "balanced approach" between funding decreases and tax increase.

Sen. E.J. Pipkin, a Republican who represents parts of the Eastern Shore, called O'Malley's remarks, "way out of balance and way out of touch."

"This governor, every opportunity, talks about more taxes and more spending," said Pipkin. "It's time to get out of the hole."

House Speaker Michael E. Busch, a Democrat, said discussion of possible tax increases would wait till next year unless there is some "catastrophic event." Busch said possible revenue streams include an increase in the gas tax, which hasn't been raised since 1992.

"They're all going to be discussed," said Busch.

But Busch said the state budget should invest in assets such as public education through investments in capital infrastructure. He estimated that there's a $6 billion to $8 billion school maintenance backlog statewide. That work could create up to 25,000 jobs if the state could pay for it, he said.

This year's state budget includes $9.3 billion in federal money. Congress' deficit-reduction committee will make its recommendations, which could include cuts to transportation funding and Medicaid, by early December.

Anne Arundel County Councilman Jerry Walker, a Republican who listened to O'Malley's speech, said he wasn't sure what to make of O'Malley's remarks about new revenues.

"I hope it's not tax increases," he said.